Netflix is raising prices on two streaming plans

LOS GATOS >> You’re going to have to dig a little bit deeper into your wallet to pay for the privilege of watching “Stranger Things,” “House of Cards” and everything else on Netflix.

That’s because the internet-based TV company is raising the prices on two of its video-streaming options.

Netflix said Thursday that the price of its most popular plan will go from $9.99 a month to $10.99. That plan allows for simultaneous streaming and HD viewing on two internet-connected devices such as an iPad and a Roku set-top box. Another plan that lets viewers watch shows on up to four devices at a time, and includes 4K Ultra HD video, is going up by $2 a month, from $11.99 to $13.99.

Netflix said it will start sending out notifications by email to its subscribers beginning Oct. 19. Based on a customer’s billing cycle, Netflix will give a subscriber 30 days to either accept the price increase, change to a lower-priced plan, or cancel service.

It will be the first time Netflix has implemented a price increase since October 2015.

There’s no real secret behind the reasons for Netflix raising its prices. The company is banking much of its future on original programming, and has said it will spend $6 billion in this year alone to acquire and produce original and exclusive programs.

Michael Pachter, who covers Netflix for Wedbush Securities, noted that the price increase is only in the U.S. and estimates that the company will take in about $700 million in new revenue from the new pricing structure. Pachter based his estimates on the approximately 50 million Netflix subscribers in the U.S., along with revenue from new subscribers who sign up next year.

“I don’t think most existing subscribers will even notice (the increase),” Pachter said. “Netflix has been really good about notifying subscribers of price hikes, so everyone will receive an email, but it’s unlikely that many will care, even if they read it. I think that most subscribers consider the service a great value.”

Original programming has become a marquee area of focus for Netflix and its streaming rivals such as Hulu, and Amazon, with its Prime Video service. In September, Hulu stole some of Netflix’s thunder when its show “The Handmaid’s Tale” won the Emmy award for Best Drama series. It was the first time an internet-streaming program won the Best Drama Emmy Award.

With its price increase, Netflix will charge more on a per-month basis than similar plans offered by either Hulu or Amazon. Hulu’s service starts at $10 a month, while Amazon’s can be had for as low as $8.25 a month, based on its $99 annual membership fee. Netflix still offers a subscription plan for $7.99 a month, but that only allows for streaming on one connected device at a time and doesn’t support HD streaming.

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Netflix has also had a mixed history of price increases. Back in 2011, the company saw hundreds of thousands of customers drop its service after it said it would no longer include streaming and DVD rentals in a single subscription.

The last time Netflix increased prices, the company took the step of grandfathering in prior customers at their old rates for two years before they would see their subscription fees go up.

Pachter thinks Netflix’s price increases would be more likely to dissuade potential new subscribers, and that Amazon and Hulu may draw those customers to their services instead.

“I expect both competitors to exploit the fact that they are cheaper, and expect households below median income to notice,” Pachter said. “I don’t think we’ll see an immediate impact (on Netflix subscriber numbers), but this could affect subscriber growth in the first or second quarters (next year) for Netflix.”

The price increase also comes 11 days before Netflix is scheduled to report its third-quarter results. The company has said it expects to add 4.4 million subscribers in the quarter, which would give it 108.4 million subscribers worldwide. Some Wall Street analysts say recent business trends suggest Netflix may even surpass that number when it reports its results.

Investors approved of Netflix’s move to boost its revenue, and sent the company’s shares up 5.4 percent, to close Thursday at $194.39.